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Blaine v. Pressler & Pressler, LLP

Superior Court of New Jersey, Appellate Division

May 31, 2013

JOANNE BLAINE AND JEAN MICHELLE BURR-D'ALESSANDRO, on behalf of themselves and those similarly situated, Plaintiffs-Respondents,


Argued November 14, 2012

On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-0583-11.

Michael J. Peters argued the cause for appellant (Pressler & Pressler, attorneys; Mr. Peters and Lawrence J. McDermott, Jr., on the brief).

Henry P. Wolfe argued the cause for respondents (The Wolf Law Firm and Law Office of Dimitrios Kolovos, LLC, attorneys; Mr. Wolfe, Andrew R. Wolf and Joseph A. Mullaney, III, on the brief).

Before Judges Lihotz, Ostrer and Kennedy.


Defendant, a law firm, appeals from the denial of its motion to stay litigation and to compel arbitration.[1] Defendant contends that the motion judge erred in holding that it was not a "party covered" by the agreement requiring arbitration and thus was not entitled to compel arbitration. We disagree and affirm.

Plaintiffs filed a putative class-action complaint against defendant in the Law Division alleging that defendant had filed false and deceptive complaints against them in the Special Civil Part on behalf of Midland Funding LLC (Midland). The Special Civil Part complaints alleged Midland had become the owner of Chase Bank USA (Chase) accounts on which plaintiffs owed money. In addition to asserting that plaintiffs were now indebted to Midland on the accounts, each Special Civil Part complaint alleged, "[a]s provided by contract, [Midland] is entitled to attorney fees of twenty-five percent of the amount due." A sum equal to twenty-five percent of the account indebtedness was thus sought in addition to the unpaid account balance.

Plaintiffs asserted that at the time the Special Civil Part complaints were filed against them, Midland had neither incurred actual attorney fees nor had it paid defendant attorney fees equaling twenty-five percent of the alleged debts they owed. They also asserted that they never entered a contract to pay Midland or "anyone" twenty-five percent of "an alleged amount due as attorney fees." Plaintiffs asserted that these allegations were false and deceptive and that defendant, as a "debt collector" under 15 U.S.C.A. § 1692a(6), violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.A. § 1692.

Defendant moved to stay the litigation and to compel arbitration, arguing that the Chase "Cardmember Agreements" which formed the basis for the Special Civil Part complaints it filed for Midland, required arbitration. Defendant argued that even if it technically met the definition of a "debt collector" under the FDCPA, it was nonetheless an "agent" of Midland, and thus entitled to invoke arbitration under the Cardmember Agreement.

The Cardmember Agreement provides that, "[e]ither you or we may, without the other's consent, elect mandatory, binding arbitration of any claim, dispute or controversy . . . arising from or relating in any way to the Cardmember Agreement." In addition, the agreement states:

For the purposes of this Arbitration Agreement, "we", "us", and "our" also includes our parent, subsidiaries, affiliates, licensees, predecessors, successors, assigns, any purchaser of your Account, and all of their officers, directors, employees, agents, and assigns or any and all of them. Additionally, "we", "us" and "our" shall include any third party providing benefits, services, or products in connection with the Account (including but not limited to . . . debt collectors, and all of their officers, directors, employees, agents and representatives) if, and only if, such a third party is named by you as a co-defendant in any Claim you assert against us.

Plaintiffs argued that because the Cardmember Agreement includes "debt collectors" within the arbitration clause only where they are named as a co-defendant in any suit against Chase or, here, Midland, and because their complaint asserted no claim against either Chase or Midland, defendant could not invoke arbitration under the contract. The motion judge agreed, denied defendant's motion to compel arbitration, and this appeal followed.

We begin by stating some general principles that guide our analysis. "An arbitration agreement is a contract and is subject, in general, to the legal rules governing the construction of contracts." Fawzy v. Fawzy, 199 N.J. 456, 469 (2009) (citing McKeeby v. Arthur, 7 N.J. 174, 181 (1951)). When the issue of contract interpretation is before an appellate court, it is "subject to de novo review by [that] court." Keiffer v. Best Buy, 205 N.J. 213, 222-23 (2011). Thus, the appellate court offers "no special deference to the trial court's interpretation and look[s] at the contract with fresh eyes." Id. at 223 (citing Manalapan Realty, L.P. v. Twp. Comm., 140 N.J. 366, 378 (1995)).

While New Jersey traditionally views arbitration as a favored remedy, Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 131 (2001), the availability of compulsory arbitration is ultimately a contract question, which is "dependent solely on the parties' agreement" with respect to the arbitration of claims under the contract. Cohen v. Allstate Ins. Co., 231 N.J.Super. 97, 101 (App. Div.), certif. denied, 117 N.J. 87 (1989). If a court finds no agreement to arbitrate exists, it matters little how well favored it is as a remedy. See AT&T Techs. v. Commc'ns Workers of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648, 656 (1986) (whether the parties agreed to arbitrate is a question to be answered by the court); see also McCarthy v Azure, 22 F.3d 351, 355 (1st Cir. 1994) (a policy favoring arbitration does not extend to a circumstance where "the identity of the parties who have agreed to arbitrate is unclear").

Here, the arbitration clause explicitly addresses who may invoke compulsory arbitration. In the "Parties Covered" section of the agreement, it is clear that Chase, or, in this case Midland, as a "purchaser of [the] [a]ccount, " is entitled to require arbitration of any claim arising from or relating to the Cardmember Agreement. While the clause does state that "officers, directors, employees, agents, and assigns" of, in this case, Midland, may require arbitration, it also explicitly excludes "any third party providing . . . services . . . (including debt collectors . . .)" unless the third party is named as a co-defendant in a claim brought against, again here, Midland.

The question, therefore, is whether defendant is considered an "agent" of Midland, or a "debt collector." To answer this question, we turn to the intent of the Cardmember Agreement. In Karnette v. Wolpoff & Abrahamson, 444 F.Supp.2d 640 (E.D. Va. 2006), the court considered a claim like the one before us and concluded that the defendant law firm could not compel arbitration under the same clause, because the defendant was clearly a "debt collector" and not an "agent" of the credit-card issuer, MBNA. Id. at 646. In so holding, the court stated:

By putting the Arbitration and Litigation section in the credit card agreement, MBNA sought to limit its exposure, and the exposure of all in its corporate family, to litigation in court. It also foresaw that plaintiffs might sue third party entities together with MBNA. Therefore, MBNA wrote a clause into the arbitration agreement that required arbitration where MBNA was joined as a co-defendant in a suit against a third party. However, for obvious reasons, MBNA had less reason for concern about suits against third parties where MBNA was not a co-defendant. Thus, given its plain meaning and accorded a common sense construction, the arbitration clause does not operate here because MBNA is not a co-defendant in this action.

[Id. at 645.]

We reach the same conclusion.

It is undisputed that defendant is a "debt collector" as that term is defined in the FDCPA.[2] Because the Cardmember Agreement expressly excludes a "debt collector" from the parties entitled to require arbitration, unless Chase or the purchaser of its account is also named as a party to the claim, the conclusion is unmistakable that defendant cannot be considered a "party covered" under the arbitration clause. To hold otherwise, we would have to ignore the intention of the parties underlying the Cardholder Agreement, and deviate from well-settled principles of contract construction. Where a contract specifies different rights to different specifically-mentioned entities the contract must be interpreted to require that specificity Maryland Cas Co v Hansen-Jensen Inc 15 N.J.Super 2027 (App Div 1951) (a "court will if possible give effect to all parts of the instrument and an interpretation which gives a reasonable meaning to all its provisions will be preferred to one which leaves a portion of the writing useless or inexplicable")

Defendant must be treated as a debt collector rather than as a general agent of Midland because defendant functioned only to serve Midland for the purpose of collecting overdue credit card debts For the purposes of the arbitration clause at issue here a debt collector cannot also be an agent To so hold would be to require an absurd result: that is a claim against a debt collector only must go to arbitration because it is an agent and at the same time must be excluded from arbitration because it is a debt collector See Karnette supra at 647 We do not read the Cardmember Agreement to require that absurd result


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